Question

At Bargain Electronics, it costs $32 per unit ($19 variable and $13 fixed) to make an MP3 player at full capacity that normally sells for $46. A foreign wholesaler offers to buy 3,180 units at $26 each. Bargain Electronics will incur special shipping costs of $4 per unit. Assuming that Bargain Electronics has excess operating capacity, indicate the net income (loss) Bargain Electronics would realize by accepting the special order.

Reject Accept Net Income
Order Order Increase (Decrease)
Revenues
Costs-Manufacturing
Shipping
Net income

Answer 1

Net income

Reject order $0

Accept order $9,540

Net Income Increase $9,540

Step-by-step explanation:

Calculation to indicate the net income (loss) Bargain Electronics would realize by accepting the special order.

Reject Order Accept Order Net Income Increase (Decrease)

Revenues $0 $82,680 $82,680

($26*3,180 units)

Costs-Manufacturing $0 $60,420 $60,420

($19*3,180 units)

Shipping $0 $12,720 $12,720

($4*3,180)

Total cost $0 $73,140 $73,140

($60,420+$12,720)

Net income $0 $9,540 $9,540

($82,680-$73,140)

The Net income have increase by the amount of $9,540 which means that the SPECIAL ORDER should be accepted.